Protection of the States’ Interest

To protect the interest of states in the financial matters, the Constitution lays down that the following bills can be introduced in the Parliament only on the recommendation of the President:

• A bill which imposes or varies any tax or duty in which states are interested;

• A bill which varies the meaning of the expression 'agricultural income’ as defined for the purposes of the enactments relating to Indian income tax;

• A bill which affects the principles on which moneys are or may be distributable to states; and

• A bill which imposes any surcharge on any specified tax or duty for the purpose of the Centre.

The expression "tax or duty in which states are interested” means:

(a) a tax or duty the whole or part of the net proceeds whereof are assigned to any state; or (b) a tax or duty by reference to the net proceeds whereof sums are for the time being payable, out of the Consolidated Fund of India to any state.

The phrase 'net proceeds’ means the proceeds of a tax or a duty minus the cost of collection. The net proceeds of a tax or a duty in any

area is to be ascertained and certified by the Comptroller and Auditor- General of India. His certificate is final.